The Wall Street Crash Flashcards
(24 cards)
the better the company is doing….
the more the share is worth
Explain how people make a profit from buying shares:
Buy a share for a cheap price and then sell it when it is expensive
When there is a demand for goods/services a company is…
worth. more therefore the prices of their shares increase
When there is no demand for goods/services a company is…
worth less therefore the prices of their shares decrease
When did the Wall Street Crash happen?
29th October 1929
What happened when the Wall Street Crashed?
16.4 million shares were traded as speculators desperately tried to sell their shares as prices fell but there were few buyers and this forced the price down further
How much money was lost in a week due to the Wall Street Crash?
$30 bil
How many x the amount the US Federal Government spends in a year was lost in one week when Wall Street Crashed?
10x
Was more lost than the US spent in WW1 when the Wall Street Crashed?
yes
List all the reasons the Wall Street crashed:
- loss of confidence
- overproduction
- unequal society
- speculation
- Laissez-Faire
- trade tariffs
- under consumption
Loss of Confidence:
- If people are confident prices will keep rising and there will be more buyers than sellers
- However, if they lose confidence and think prices will stop rising then there will be sellers than buyers and the whole structure comes down
- Loss of confidence causes people to take their shares out making other people start to take their shares out causing prices to increase
Overproduction:
American industries were producing more than they could sell e.g. in farming crops were being overproduced and not as many people could buy them due to the decreasing population and many people couldn’t afford them
Unequal Society:
Majority of Americans who were poor could not afford to buy expensive products like (e.g. cars) even on the generous hire purchase and credit
in the 1920s what did speculators not have to do?
- pay full value shares
- could buy ‘on margin’ which meant they only had to put 10% of the cash and borrow rest
What is speculation?
Where you borrowed money to buy shares and sold them as soon as the price had risen and they would pay off their loan and make a profit
How many new investors were spectators?
600,000
What is speculation a form of?
gamblling
Did American banks get involved in speculation?
yes
How much money did American banks lend for speculation?
$9 bil in 1929
What happened when poorer people who knew nothing about the stock market got involved with speculation?
and get in debt, banks become bankrupt and ask for their money back and when they can’t pay it back they lose things like their house as collateral
What happened when poorer people who knew nothing about the stock market got involved with speculation?
and get in debt, banks become bankrupt and ask for their money back and when they can’t pay it back they lose things like their house as collateral
Laissez-Faire:
- Meant the gov couldn’t interfere when Wall Street Crashed and when the market was getting worse
- The gov didn’t set any rules on bankers which meant banks could be irresponsible
Trade Tariffs:
Other countries put tariffs on American products like America did to them meaning many people in Europe couldn’t afford any products this caused products to be overproduced causing a company to lose money
Under Consumption:
All the people who could afford expensive things e.g. all the people who could afford cars bought them in the 1920s meaning the rate of consumption decreased as there was less demand for goods
